Sample Essay – Financial Performance Transformation
Financial performance transformation can be best reported by its key variables. The analysis conducted of these 77 firms revealed an increase in total revenue of structured firms by 24.3 percent and 35.9 percent in 1998 and 1999 respectively due to investment in the new business. While the control group of firms that did not restructure their business reported a negative impact on the market.
The profit margin reported showed that the restructured firms increased their profit margin by a statistically significant average of 4.493 percent (Zhenhu, 2009). While the control firms average profit margins increased by 2.06% but were not statistically significant. Return on Assets increased by 11% which clearly indicates that restructuring does improve return on assets (Zhenhu, 2009).
In terms of Asset Turnover, there was no significant change in the asset turnover ratio before and after restructuring. Therefore, this means that corporate restructuring does not significantly improve the restructuring firms’ asset management efficiency (Shivdasani, 1997). This is because the total revenue may not increase as fast as the value of the total asset due to the large investments of the firms. Despite this stagnant change, it is clear corporate restructuring transforms financial performance positively.
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